MARC has affirmed IJM Plantations Berhad’s (IJMP) RM150 Million Al-Bai Bithaman Ajil Islamic Debt Securities (ABBA) rating at A+ID with stable outlook. The affirmation reflects IJMP’s steady operating performance focusing on oil palm plantation and milling as well as its strong financial profile. The rating is nonetheless moderated by IJMP’s exposure to the cyclical developments affecting the palm oil industry.

IJMP is principally involved in the cultivation and management of palm oil estates. Currently, IJMP’s landbank totalling 29,764 hectares (ha) primarily concentrated in the Labuk-Sugut and Sandakan regions of Sabah, out of which 24,607 ha are planted with palm oil. Based on its present plantation profile, 20,356 ha consist of matured palm oil while 4,251 ha comprises of immatured palm oil plantings. For the fiscal year ended 31 March 2006 (FY2006), IJMP recorded an average crop yield of 22.2 tonnes/ha; exceeding the industry’s average yield of 18.9 tonnes/ha but slightly below Sabah’s average of 23.0 tonnes/ha. The mature areas of Sandakan region estates achieved an average yield of 27.2 tonnes/ha. This is diluted by the young plantations in Sugut achieving only 18.1 tonnes/ha. In view of its strategically located palm oil mills and well managed estates, IJMP also recorded higher average oil extraction rate (OER) of 22.4% compared to 22.0% in the previous corresponding period.

Sales of CPO accounted for 77.2% (i.e. RM188.97 million) of IJMP’s total revenue in FY2006. On an annualised basis, the Group’s revenue was lower as a result of lower average CPO prices of RM1,373/tonne compared to RM1,541/tonne in FY2005. Nonetheless, IJMP financial performance is anticipated to strengthen in the medium term underpinned by improving crop production and higher average CPO prices. Debt leverage ratio remains low, ranging between 0.03x to 0.47x over the past five fiscal years. Liquidity/financial flexibility position appears robust with cash and bank balance of RM53.36 million as at end June 2006 supported by its major shareholder, IJM Corporation Berhad. Meanwhile IJMP’s unutilised banking lines amounted to RM5.04 million as at September 2006.